PRODATA PARTNERS LTD

Market Modelling in Telecoms & ICT Markets

www.prodata-partners.com

  

Market Forecasting & Modelling Market Forecasting & Modelling

Prodata undertake extensive market modelling and forecasting work for blue chip customers in the international telecoms & ICT marketplace

Desk research

Macro-economic factors

Dynamic market models

Primary research

Client data

Results orientated advice:-

Identify areas of opportunity & threat

Forecast revenues and cost

Understand the impact of industry trends

Target business development, sales & marketing activity

Test pricing strategies

Benchmark operations against industry standards

Inform investment decisions

• Since the late 1980s, Prodata has advised several telecommunications & ICT companies/consortia on likely demand for new & existing products & services.

• Our clients rely on credible and reliable demand forecasts, to ensure that their applications and business plans are transparent and robust.

• Clients need to know the expected stream of revenue from projected demand, in order to judge the value of their investment and customer base.

• In addition to demand modelling, Prodata offers a modelling service that ranges from support in preparation of business plans or bid documents, to the turnkey preparation of models and business/marketing plan, including technical and financial input.

Prodata Market Modelling – Methodologies (1)Prodata Market Modelling – Methodologies (1)

• Prodata modelling support has been highly successful in securing licences & business plan investment for many clients, varying in value from thousands to several hundred millions of dollars.

• Prodata models make extensive use of a variety of sources, including:- Our own or the client's primary research data; Secondary market/demographic data sources; Client in-house data, e.g. from billing/reporting systems.

• Our methodology also embraces techniques such as price elasticity of demand, demand adoption curves, and market segmentation.

Prodata Market Modelling – Methodologies (2)Prodata Market Modelling – Methodologies (2)

• Prodata market modelling & forecasting has covered a number of business-critical areas for our ICT clients, e.g.:-

• Potential demand

• Penetration forecast, e.g. product/customer life cycle modelling

• Churn, market share of gross additions, market share of installed base

• Mobile/fixed subscriber base

• Price elasticity of demand & monthly bill forecasts, e.g. using price elasticity of demand

• Take-up of new services, e.g. broadband

• Tariff forecasts

• Traffic forecasts

• Incremental revenue from new services

• Cost/ROI modelling

• Customer segmentation

Prodata Market Modelling – Typical CoverageProdata Market Modelling – Typical Coverage

Prodata has produced a wide range of market models across several countries worldwide, modelling up to e.g. 10 years ahead for by market, competitor base, region or country.

Our models have frequently formed an integral part of operator licence applications.

Such models cover all aspects of marketing planning for operators already active in a specific market, or a new operator/market entrant.

Forecasts can be developed for the market as a whole, and in more detail for a specific venture under consideration.

Modelling methodology often consists of 4 key stages:-

Determine the maximum potential demand expressed as the percentage of the total population who will eventually be subscribers, divided into e.g. business and consumer market segments;

Fit product life cycle curves for each market segment to forecast the market by segment, and calculate the total market;

Develop assumptions as to coverage, churn, and market shares, to forecast the market share for each competitor in the market;

Forecast the marketing parameters required for the business plan of the venture under consideration, such as tariff packages, minutes of use per customer, traffic by destination & origin, roaming, interconnect, distribution, etc.

Prodata Market Modelling – Typical MethodologyProdata Market Modelling – Typical Methodology

• Basic Data Requirements– Penetration & total subscribers– Price elasticity of demand– Average monthly bill and total revenue– Minutes of use

• Other– Coverage– Churn & gross additions– Market share of gross connections and installed base– Customers by segment/tariff plan– Take-up of services– Traffic destinations, origins & roaming– Interconnect– Distribution channels

Example Outputs Required – Telco ModelsExample Outputs Required – Telco Models

Maximum PotentialDemand

Market Research, Benchmarks &Reasonableness Checks

Product Life CycleStage

Determination

Historic Data, Shape of Growth CurveMarketing Indicators

Market Research, Penetration Forecast, Reasonableness Checks

Marginal Bill Forecast

Demand / PenetrationForecast

Curve Fit Consistent With Product Life Cycle Stage and Price Elasticity of Demand

Market ValueForecast

Average Monthly Bills & Total Subscribers

Forecast of AverageMonthly Bill

Current Average Monthly Bill Plus Sum ofMarginal Bill, Price Elasticity of Demand

Tariffs Against Average Monthly Bill, Benchmarks for Mobile Terminated Traffic

Minutes of UseForecast

Example Forecast Model OutlineExample Forecast Model Outline

No interest at all

No interest at all

Total sample

Total sample Collect classification

data & terminate

Collect classificationdata & terminate

Interestedin product /

service

Interestedin product /

service

Reject because of price or coverage

Reject because of price or coverage

Explain price will fall & quality will improve in future

Explain price will fall & quality will improve in future

All respondents who continue to main survey represent the

maximum potential demand

All respondents who continue to main survey represent the

maximum potential demand

Determine at what price respondents are willing to adopt

and use product/service

Determine at what price respondents are willing to adopt

and use product/service

Collect classificationdata & terminate

Collect classificationdata & terminate

Maximum potential demand as % of population limited by

willingness to pay a minimum

Maximum potential demand as % of population limited by

willingness to pay a minimum

Price elasticity of demand, revenue forecast as a function

of penetration

Price elasticity of demand, revenue forecast as a function

of penetration

Market segmentationof product/service demand

Market segmentationof product/service demand

Demand & Price Elasticity Models – Typical Demand & Price Elasticity Models – Typical Decision ChainDecision Chain

PopulationCoverageForecast

PopulationCoverageForecast

Per Operator Gross Adds &Installed Base

Per Operator Gross Adds &Installed Base

Forecast of Penetrationof Maximum

PotentialDemand

Forecast ofGross Adds &Installed Base

Forecast ofGross Adds &Installed Base Venture Gross

Adds by TariffPlan

Venture GrossAdds by Tariff

Plan

Market Shareof GrossAdditions

Market Shareof GrossAdditions

Per Operator

Churn

Per Operator

Churn

VentureTariff Plans

VentureTariff Plans

Venture InstalledBase by

Tariff Plan

Venture InstalledBase by

Tariff Plan Monthly Minutesof Use byTariff Plan

Monthly Minutesof Use byTariff Plan

Venture Average

Monthly BillForecast

Venture Average

Monthly BillForecast

Forecast of Market Average

Monthly Bill

Forecast of Market Average

Monthly Bill

MaximumPotentialDemand

Price Elasticity re Monthly Bill forMarginal Subscribers as Function

of Penetration of Potential Demand

Average MonthlyBill ExistingSubscribers

Market Survey or Benchmarks

Forecast of Marginal Monthly

Bill as a Function

of Penetration0

10

20

30

40

50

60

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

CompareAdjust

Forecast Model Flow Chart Example: Mobile ModelForecast Model Flow Chart Example: Mobile Model

Handset Cost vs. Price Elasticity of Demand

0

500

1,000

1,500

2,000

2,500

3,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Han

dse

t P

rice

0%

5%

10%

15%

20%

25%

30%

35%

Pen

etra

tio

n o

f P

op

ula

tio

n

Penetration of Pops

Adoption Price Accepted

Handset Price

Western European country - sample 2,000 interviews

Cost of Adoption vs. Penetration Forecast: ExampleCost of Adoption vs. Penetration Forecast: Example

£ Spend on ICT & Comms by Company

% Intended Increase in ICT

Spend (Customer Research)

Av. % of ICT spent on Comms

Av 3-Yr % turnover growth

Projected Customer Turnover,

ICT & Comms

Spend for next year

Weighting: Av 3-Yr GDP LOB Growth (Natl

Office for Stats)

Weighting: LOB Comms Intensity Factor (Industry

Ests)

Weighting: Non-Economic LOB

Drivers (Industry Rpts)

Annual UK & Global Turnover Data by Company

Av. % of turnover spent

on ICT (Industry Ests)

0

10

20

30

40

50

60

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20070%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Projected Weighted Available

Customer ICT & Comms Spend for next year

Customer ICT spend split down to Voice, Data &

Mobile (Customer Research % Spend Ests)

Weighting: Tiered

Customer Category

Customer £ Split by

Product Line (Customer Research)

Customer £ potential for current/next

year

Back check vs. client billed £

Forecast Model Flow Chart Example: Business Forecast Model Flow Chart Example: Business Market for Telecoms ServicesMarket for Telecoms Services

Modelling CRM market segmentation by product type

• Prodata constructed a bottom-up model of the international CRM market for a leading telecommunications company. .

• Dynamic, macro-driven model provided vital information on current addressable market and future growth of the CRM market by product type.

• Identifying key growth areas in the CRM sector, this model was an integral resource enabling the client to identify opportunities for market share gains, and to maximise returns from the adoption of CRM as a key business strategy.

Prodata Product & Service Skills AreasProdata Product & Service Skills Areas

Voice ServicesWide area networking Inbound services Managed services Private circuitsIP Networking/Telephony

Applications CRM Knowledge management Supply chain management Outsourcing/BPOE-Business/Content

Data ServicesFrame Relay ATM MPLS Broadband Internet, IntranetsLocal Area NetworkingOptical/Storage Area Networking

Wireless/MobileOperator Licence Models Market PricingChurn Prevention Mobile Data/Fixed-Mobile

OtherNetworking EquipmentSoftware ApplicationsBusiness Continuity/Security ApplicationsB2E / Enterprise-Based Solutions

Prodata Market Modelling – Case Studies (1)Prodata Market Modelling – Case Studies (1)

UK MNC Market Sizing Modelling (UK Telco)

Model of UK multinational business market for telecoms services, to give the client a multi-dimensional understanding of markets and lines of business. In-depth analysis of the market sizing opportunities for each product/service area, broken back by product components for each of the client’s constituent markets. Model data was generated from:-

External primary market research Assessment of external factors, e.g. National Office of Statistics data on GDP etc Secondary market data, e.g. vertical market sector reports (Mintel etc) Client internal database data, e.g. account manager input

This provided strategic and marketing information for the client on opportunities by line of business, products and services, customer segment/sector etc.

Reseller Channel Model (UK Telco)

Database model profiling all resellers, distributors and other partners used by the client in the telecoms market, together with market potential for client products & services. Model included easy-to-use dropdown menus and browser buttons, for client users to view market profiles and potential revenues by product/channel at a glance.

Prodata Market Modelling – Case Studies (2)Prodata Market Modelling – Case Studies (2)

CRM Market Modelling & Forecasting (European Telco)

In-depth market & revenue modelling, covering:- Potential CRM universe by size of business/sector/spend on CRM Analysis & projection of take-up by product/service Sensitivity Analysis - modelled scenarios Projected future value of different customer segments

ICT Propositions Model (International Telco)

• Prodata generated potential market sizing breakdowns for key propositions areas being developed in CRM, Organisational Effectiveness, Knowledge Management, SCM & E-business.• Output consisted of 5 models, showing potential market size for each constituent product within product lines across each of the propositions areas.• Each model contained market sizing estimates by sectors and lines of business, with estimates of potential client market share.• Further assessment was carried out to identify equivalence against client billing and account management data.• Segmentation was carried out by proposition and by market. The model segmented down to revenue opportunities, by analysing potential market share by product line within each proposition group.

Prodata Market Modelling – Case Studies (3)Prodata Market Modelling – Case Studies (3)

Drivers of Customer Satisfaction Models (International Telco)

• Key driver satisfaction modelling for several client business divisions since 2001.• Modelled customer satisfaction metrics against service and perception measures via external customer research, benchmarked against client and customer-defined targets.• Satisfaction driver models use multiple regression techniques, including ridge regression to remove the effects of correlation between predictor variables/ multicollinearity.• Prodata has also analysed, compared and modelled data from the client’s employee care and reseller surveys.

Voice Services Market Model (UK Telco)

• Market size and share modelling tool for voice & related services.• Data determined from several external & internal sources, e.g.:-

Desk research e.g. Oftel and analyst reports Monthly research interviews with customers

• Products/services modelled included:- Local, National, IDD, Fixed-Mobile, Non-Geographic, Internet Calls Analogue/Digital Private Circuits PSTN/ISDN Lines Centrex Calls & Lines Switches (< 100 and > 100 ports)

Prodata Market Modelling – Case Studies (4)Prodata Market Modelling – Case Studies (4)

Capacity Resale Market Model (International Telecoms Reseller)

• Forecasting model to assess market for dynamic resale of excess T-1 capacity, including traffic & pricing scenarios, customer retention/churn analysis, capital outlay, cost components & risk factors.• Resulted in successful strategy for marketing excess capacity, in line with annual increases in T-1 traffic take-up between US and UK.

Microbusiness & Consumer Fixed & Mobile Market Models (UK MVNO)

• Modelled 12 industry sectors & 11 demographic segments of fixed & mobile universes, analysed by calls, equipment, market value and share.• Model data was generated from Prodata primary market research and secondary reports, e.g. Oftel, TGI data.• Model output was used extensively to support business case and market planning.

Operator Licence Models (International Telcos/Altnets/Mobcos)

• Prodata has been used extensively since the early 1990s to construct operator business case licence models, by mobile and fixed licence applicants and new market entrants across Europe and Asia-Pacific, including Philippines, Taiwan, Germany, Netherlands, and several other markets.

"The quality of Prodata's work has surpassed our expectations, and given us a rich resource for continuing to

enhance our understanding of SME business needs." 

Rogers AT&T Wireless

"Prodata's customised mobile market forecast proved very effective in meeting our marketing planning and management

reporting needs."

Bouygues Telecom

Prodata Market Modelling – Customer FeedbackProdata Market Modelling – Customer Feedback

• We work with over 35 consultants based in more than 20 countries worldwide• A virtual team is put together based on the mix of deliverables and individual

expertise required for each project• All our consultants have had extensive hands-on telecoms/ICT experience prior

to working in market modelling, research and consultancy with Prodata

Prodata Market Modelling TeamProdata Market Modelling Team

Hakan Eriksson – Senior Associate• Highly experienced telecommunications &

ICT modeller• Specialist in business forecasting and

planning, utilising & linking data from disparate sources

• Skilled in database modelling• In-depth knowledge of statistics, business

services and programming• Key Prodata market modelling projects

managed by Hank include:-• Complex business market sizing & forecasting model updated bi-annually for a UK telco, covering all telecoms products & services & drawing/linking data from external secondary data sources, market research surveys, and the client's own billing and reporting systems• Industry sector market profiling & forecasting model for a major telco, including analysis of demographic & database data

• Hank previously developed a number of services for Ericsson, e.g. management of writing code for Symbian operating system

Louise Crosby – Senior Associate• Over 18 years’ experience in telecoms &

utilities market modelling• Key Prodata market modelling projects

managed by Louise include:-• Detailed market sizing & forecasting model, updated quarterly for a UK telco selling to the top 2500 UK enterprises, covering all telecoms products & services• Market forecasting and profiling model for a major telco, covering several industry sectors in the medium-large enterprise market

• Previously senior modeller in PriceWaterhouseCoopers telecommunications & utilities consulting divisions

• Managed complex business planning & evaluation models, development of corporate guidelines for spreadsheet modelling best practice

• Economist to the Government of Botswana, including managing large government projects in the telecommunications sector

Prodata Modelling Specialists - SelectionProdata Modelling Specialists - Selection

www.prodata-partners.com

Contact usContact us

DIRECTOR: Sarah Ball

Telephone: 01494 71717607767 477738 (mobile)

Email : sarah.ball@prodata-partners.com